AIC Assessment & Evaluation 5

Question 1

A case reserve on an individual claim represents:

Accepted Answer

The adjuster's estimate of the amount needed to settle that claim

Answer

A case reserve is the estimated ultimate cost to resolve a specific claim.

Question 2

Repeatedly raising a reserve in small increments rather than setting an accurate amount early is called:

Accepted Answer

Stair-stepping

Answer

Stair-stepping distorts loss data and is considered poor reserving practice.

Question 3

IBNR reserves are established for:

Accepted Answer

Losses that have occurred but have not yet been reported

Answer

IBNR stands for incurred but not reported, covering losses that have happened but are unknown to the insurer.

Question 4

Which reserving method assigns the same predetermined amount to every claim of a given type?

Accepted Answer

Average value method

Answer

The average value method uses a set average for claims with similar characteristics, often small high-volume claims.

Question 5

A settlement providing periodic payments over time, often funded with an annuity, is a:

Accepted Answer

Structured settlement

Answer

Structured settlements spread payments over time, commonly through an annuity purchased by the insurer.

AIC - Associate in Claims Practice Test